B.O.S. Better Online Solutions .(BOSC) - 2023 Q4 - Annual Report

Directors, Senior Management and Employees This section details the company's leadership structure, compensation, board practices, employee overview, and share ownership by key personnel Directors and Senior Management Details roles, ages, and biographies of directors and senior management, highlighting key executives like Ziv Dekel, Eyal Cohen, Avidan Zelicovsky, and Moshe Zeltzer Directors and Senior Management Overview | Name | Age | Position | | :--- | :--- | :--- | | Mr. Ziv Dekel | 60 | Chairman of the Board of Directors (Class C) | | Ms. Osnat Gur | 53 | Director (Class A) | | Mr. Yaron Eldad | 57 | Chairman of Audit and Compensation Committees (Class B) | | Mr. Eyal Cohen | 55 | Chief Executive Officer and Director (Class C) | | Mr. Avidan Zelicovsky | 54 | President | - Mr. Eyal Cohen, previously the CFO since 2007 and Co-CEO since 2017, has been the sole Chief Executive Officer since December 2019[9] - Mr. Yaron Eldad serves as the Chairman of both the Audit Committee and the Compensation Committee, and the Board has determined he is an independent director and a financial expert under SEC and Nasdaq rules[7] Compensation Outlines the compensation structure for directors and executive officers, including 2023 totals, Israeli Compensation Policy requirements, and specific salaries and benefits for key executives Total Director and Officer Compensation (2023) | Group | Salaries, Fees, Stock-Based Compensation, etc. (in thousands) | Pension, Retirement and Similar benefits (in thousands) | | :--- | :--- | :--- | | All directors and officers as a group (6 persons) | $744 | $105 | - The company's Compensation Policy, required by Israeli law (Amendment 20), was approved by shareholders and recently amended on December 14, 2023, to include a clawback policy compliant with Nasdaq listing rules[16][17][18] Executive Officer Monthly Salaries | Officer | Position | Gross Monthly Base Salary | | :--- | :--- | :--- | | Mr. Eyal Cohen | CEO | NIS 50,145 (approximately $13,825) | | Mr. Moshe Zeltzer | CFO | NIS 30,000 (approximately $8,270) | | Mr. Avidan Zelicovsky | President | NIS 54,984 (approximately $15,159) | - Non-employee directors receive an annual compensation of NIS 29,270 (approximately $9,104) and NIS 2,175 (approximately $676) for each board and committee meeting attended, and are also eligible for grants of 7,500 options every three years[24][25] Board Practices Describes the Board of Directors' structure, including its classified nature, fiduciary duties, committee compositions, and the company's election to opt out of external director requirements - The Board of Directors is currently comprised of 4 directors, divided into 3 classes with staggered three-year terms to ensure continuity[47] - The company has opted out of the Israeli requirement to appoint External Directors, as permitted by the Relief Regulations for companies listed on foreign exchanges like Nasdaq[32][51] - The Audit Committee consists of three independent directors, with Yaron Eldad serving as the chairperson and designated financial expert[57][58] - The Compensation Committee is composed of three independent directors and is responsible for recommending the compensation policy and approving terms of employment for office holders[63][64][65] Board Diversity Matrix (As of March 15, 2024) | Gender Identity | Count | | :--- | :--- | | Female | 1 | | Male | 3 | | Non-Binary | 0 | | Did Not Disclose | 0 | | Total Directors | 4 | Employees Provides an overview of the company's 83 employees as of March 15, 2024, all based in Israel, detailing their functional distribution and labor relations status Employee Breakdown by Function (as of March 15, 2024) | Department | Number of Employees | | :--- | :--- | | General and administrative | 10 | | Marketing and sales | 17 | | Technicians | 14 | | Engineers | 6 | | Manufacturing | 4 | | Operating activities | 32 | | Total | 83 | - All employees are located in Israel and are not represented by any labor union or collective bargaining agreements, though certain national labor provisions apply[75][85] Share Ownership Details beneficial share and option ownership by directors and officers, and outlines the extended 2003 Israeli Stock Option Plan with 1,000,000 reserved Ordinary Shares Share and Option Ownership by Officers and Directors (as of March 15, 2024) | Name | Position | Options Beneficially Owned | % of Shares and Options Beneficially Owned | | :--- | :--- | :--- | :--- | | Eyal Cohen | Chief Executive Officer | 183,475 | 3.19% | | Avidan Zelicovsky | President | 13,333 | 0.23% | | Ziv Dekel | Chairman | 27,500 | 0.48% | | Yaron Eldad | Director | 7,500 | 0.13% | | Moshe Zeltzer | Chief Financial Officer | 20,000 | 0.35% | | Osnat Gur | Director | 7,500 | 0.13% | - The company's 2003 Israeli Stock Option Plan was extended through May 31, 2033, and the pool of reserved shares was increased to 1,000,000 Ordinary Shares[82] - As of March 20, 2024, there were 300,833 options outstanding under the plan, of which 156,666 were exercisable[94] Major Shareholders and Related Party Transactions This section identifies major shareholders and details transactions with related parties, including intercompany management fees and director/officer indemnities Major Shareholders Identifies major shareholders, noting Todd M. Felte as the only beneficial owner of over 5% of Ordinary Shares, holding 9.68% as of March 20, 2024 - To the company's knowledge, as of March 20, 2024, Todd M. Felte was the only shareholder beneficially owning more than 5% of the company's shares, with 556,390 Ordinary Shares representing 9.68% ownership[95] Changes in Major Shareholder Holdings (Number of Shares) | Shareholder | Dec 31, 2020 | Dec 31, 2021 | Dec 31, 2022 | Dec 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Todd M. Felte | 845,700 | 845,700 | 556,390 | 556,390 | Related Party Transactions Details related party transactions, including intercompany management fees and indemnity undertakings for directors and officers with liability insurance up to $2.5 million Intercompany Management Fees | Year | Amount Charged to Subsidiaries | | :--- | :--- | | 2023 | $2,331,000 | | 2022 | $2,185,000 | - The company provides indemnity undertakings to its directors and officers for up to an aggregate amount of $2,500,000, in excess of any insurance proceeds[102] - The company's Compensation Policy allows for the purchase of directors' and officers' liability insurance with coverage up to $2.5 million per event and per period[104] Financial Information This section presents key financial data, including export revenues, legal proceedings status, dividend policy, and a statement on significant changes Consolidated Statements and Other Financial Information Presents key financial details, including a decline in export revenues to 14% in 2023, absence of legal proceedings, and no formal dividend policy Sales Outside of Israel | Year | Export Revenues | % of all revenues | | :--- | :--- | :--- | | 2023 | $6,054,000 | 14% | | 2022 | $7,216,000 | 17% | | 2021 | $7,972,000 | 24% | - The company reports no ongoing legal proceedings[109] - The company does not currently have a dividend policy, and any future dividends will be determined by the Board of Directors based on earnings and financial condition[110] Significant Changes Reports no significant changes in the company's financial or operational status - No significant changes were reported[111] The Offer and Listing This section provides details regarding the company's stock listing on the Nasdaq Capital Market Offer and Listing Details Provides details on the company's stock listing, with Ordinary Shares traded on the Nasdaq Capital Market under the symbol "BOSC" - The company's Ordinary Shares are traded on the Nasdaq Capital Market under the symbol "BOSC"[112][139] Additional Information This section covers the company's governing documents, exchange controls, and a comprehensive overview of Israeli and U.S. tax implications for shareholders Memorandum and Articles of Association Summarizes key provisions of governing documents, including board powers, shareholder rights, classified board structure, and Israeli legal requirements for changes of control - The company's authorized share capital was increased to 11 million ordinary shares in December 2022[144] - The Board of Directors is classified into three separate classes, with each class serving a three-year term, a structure that may delay or deter a potential takeover[155][250] - Israeli law requires a tender offer for share acquisitions that result in a holding of 25% or more, or more than 45%, of the voting power, unless certain exceptions apply[247] Exchange Controls States no current Israeli currency control restrictions on dividends or share sale proceeds, but notes the government's retained authority to impose them - There are currently no Israeli currency control restrictions on dividends or proceeds from share sales, but the government retains the authority to impose them in the future[254] Taxation Provides an overview of Israeli and U.S. federal income tax implications for shareholders, covering corporate tax, capital gains, dividends, and PFIC status - The Israeli corporate tax rate has been 23% effective January 2018[261] - Non-Israeli residents are generally exempt from Israeli capital gains tax on sales of shares of Israeli companies traded on a foreign stock exchange, provided certain conditions are met[264] - Dividends paid to non-Israeli residents are generally subject to a 25% withholding tax, which may be reduced by an applicable tax treaty (e.g., the U.S.-Israel Tax Treaty)[270][272] - The company believes it was not a Passive Foreign Investment Company (PFIC) for the 2023 taxable year, but makes no assurances for future years, as PFIC status could have adverse U.S. tax consequences for U.S. shareholders[336] Quantitative and Qualitative Disclosure about Market Risk Details primary market risks, including foreign currency exchange rate risk, credit risk from trade receivables, and interest rate risk, with hedging strategies and receivable insurance noted Foreign Currency Exchange Rate Risk Addresses currency risk, primarily NIS against USD, and the use of forward contracts to hedge payroll and related expenses - The company's most significant currency exposure is to the Israeli Shekel (NIS) against the U.S. dollar[358] - The company uses forward contracts designated as cash flow hedges to reduce the risk of exchange rate fluctuations on payroll and related expenses denominated in NIS, which resulted in an income of ($25,000) in 2023[360] Credit Risk Management Discusses credit risk from trade receivables across various regions, noting the absence of collateral requirements and the use of receivable insurance Trade Receivables by Geographical Market (in thousands) | Region | 2023 | 2022 | | :--- | :--- | :--- | | Israel and others | $11,567 | $9,993 | | India | $355 | $435 | | Americas | $263 | $401 | | Far East | $49 | $5 | | Europe | $190 | - | | Total | $12,424 | $10,834 | Controls and Procedures Addresses internal controls, with the CEO and CFO concluding effective disclosure controls and internal control over financial reporting as of December 31, 2023, based on the COSO framework Management's Annual Report on Internal Control over Financial Reporting Management, including the CEO and CFO, concluded that internal control over financial reporting was effective as of December 31, 2023, based on the COSO (2013) framework - The CEO and CFO concluded that the company's disclosure controls and procedures were effective at a reasonable level of assurance as of the end of the period covered by the report[421] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2023, based on the COSO (2013) framework[423][424] - This annual report does not include an attestation report from the registered public accounting firm regarding internal control, as permitted by SEC rules for the company[425] Corporate Governance & Other Items This section covers the audit committee's financial expert, principal accountant fees, corporate governance practices as a foreign private issuer, and cybersecurity risk management Audit Committee Financial Expert The Board of Directors has designated Mr. Yaron Eldad, Audit Committee chairman, as an "audit committee financial expert" under SEC regulations - The Board of Directors has determined that Mr. Yaron Eldad qualifies as an "audit committee financial expert"[429] Principal Accountant Fees and Services Details fees paid to Fahn Kanne & Co. Grant Thornton Israel, the independent registered public accounting firm, all pre-approved by the audit committee Principal Accountant Fees (in thousands) | Fee Type | 2023 | 2022 | | :--- | :--- | :--- | | Audit Fees | $81 | $95 | | All Other Fees | $0 | $0 | | Total | $81 | $95 | Corporate Governance As a foreign private issuer, the company follows Israeli corporate governance practices, specifically regarding shareholder approval for certain private placements, instead of Nasdaq rules - The company, as a foreign private issuer, follows Israeli law instead of Nasdaq rules regarding shareholder approval for certain private placements, as Israeli law does not require it for public companies traded only outside of Israel[435][471] Cybersecurity Describes the company's cybersecurity risk management program, overseen by key executives and the audit committee, with no significant material threats identified as of the reporting date - The company has an established cybersecurity risk management program, with oversight provided by the audit committee[474][476] - As of the reporting date, no significant cybersecurity threats have been identified that are reasonably likely to materially impact the company[476] Financial Statements This section presents the company's consolidated statements of operations, balance sheets, and cash flows, highlighting key financial performance and position metrics Consolidated Statements of Operations Revenues increased to $44.2 million in 2023, with stable gross profit and a significant rise in net income to $2.01 million due to reduced expenses Consolidated Statements of Operations Highlights (in thousands) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Revenues | $44,179 | $41,511 | $33,634 | | Gross Profit | $9,209 | $9,060 | $6,586 | | Operating Income | $2,450 | $1,929 | $517 | | Net Income | $2,005 | $1,276 | $451 | | Diluted EPS | $0.34 | $0.23 | $0.08 | Consolidated Balance Sheets Total assets grew to $32.5 million and shareholders' equity increased to $18.8 million as of December 31, 2023, reflecting a strengthened financial position Consolidated Balance Sheet Highlights (in thousands) | Metric | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $2,344 | $1,763 | | Total current assets | $22,018 | $20,574 | | Goodwill | $4,895 | $4,895 | | Total assets | $32,481 | $30,595 | | Liabilities & Equity | | | | Total current liabilities | $10,904 | $11,195 | | Total liabilities | $13,642 | $13,961 | | Total shareholders' equity | $18,839 | $16,634 | Consolidated Statements of Cash Flows Operating activities generated $1.83 million in cash in 2023, contributing to a $0.58 million increase in cash and cash equivalents despite investing and financing outflows Consolidated Statements of Cash Flows Highlights (in thousands) | Metric | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $1,829 | $1,283 | $9 | | Net cash (used in) investing activities | $(772) | $(3,091) | $(379) | | Net cash provided by (used in) financing activities | $(389) | $1,584 | $1,311 | | Increase (decrease) in cash | $668 | $(224) | $941 |